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Infrastructure Giant AECOM a Front-Runner for Coveted Minneapolis Site

Los Angeles Company Could Build Condos, Office and Retail on Washington Avenue
August 8, 2018
Los Angeles-based multinational engineering and construction services firm AECOM is poised to win development rights to a sought-after sliver of land in downtown Minneapolis, beating out three local companies in the process.

AECOM is the favored candidate in the city of Minneapolis’ bid to find a suitor for 800 Washington Ave., said Emily Stern, senior project coordinator with the city’s planning and economic development department. Stern gave a brief update on the city’s selection at a neighborhood meeting on Monday.

The infrastructure company has pitched condominiums, office and retail, crowned with rooftop gardens, for the narrow rectangular site, which covers 0.56 acres in all. The neighborhood land use committee provided a total development cost for AECOM of $65 million.

There are two possible scenarios under AECOM’s proposal, which differ in magnitude, Stern said: The more modest plan calls for a nine-story building with 76 condominiums, but if AECOM elects to add height to the building, the unit count could go up to 111. In the latter case, the building would be 12 stories tall.

A portion of the condominiums would be affordable to those making 80 percent of the area's median income, which currently stands at $94,300 a year in the Minneapolis-St. Paul region, according to data on file with the Metropolitan Council. About 10 percent of the units in the smaller development would be affordable, with the remainder selling at market rates, Stern said. The cut of affordable units would go up to 15 percent if the larger plan goes through.

On the retail side, AECOM has letters of interest from three small retailers. A representative for AECOM, Sandra Rieger, said the company has a potential lineup that includes Five Watt Coffee, a fitness business, and Esso 44, a new venture by Romeny Chan, co-founder of Roe Wolfe boutique. Rieger explained Esso 44 as a, "boutique apothecary startup concept (housewares, soaps, wellness items)."

As for the office component, the development site is located next to the American Academy of Neurology’s office building, which has expressed a strong interest in expanding. AECOM has a letter of support from the Academy, but its rival for the development of 800 Washington, Minneapolis-based Sherman Associates, has a letter of intent. Sherman also has a letter of intent with Pinstripes, an eatery that offers bowling and bocce ball.

Nevertheless, the city is leaning heavily toward AECOM’s proposal, Stern said.

"AECOM’s project has by far the most innovative design. They incorporate a number of very interesting public open spaces and rooftop agriculture elements," Stern said. "Overall, by every other criteria, AECOM ranked above Sherman. That said, Sherman’s proposal is still very solid."

"However, the staff team felt there was nothing very innovative about the building design," Stern continued. "Not that it was bad. It was just more of the same."

Stern, City Council Member Steve Fletcher, and members of the neighborhood land use committee also felt that condominiums were preferable to the 112 rental units Sherman proposed.

"There is no entry level housing anywhere in the city right now. It’s very, very hard for someone at 80 percent AMI to think about homeownership," Fletcher said.

The city is still negotiating a purchase price, Stern said, but she noted that both Sherman and AECOM made offers that were above the appraised value. The other two parties, 45 North Group and Oppidan, made offers that fell short, she said.

Their proposals also included only office and retail, no housing, which also excluded their proposals from consideration, she added.

The city council will vote on the matter at a meeting scheduled for Aug. 31, Stern said. For now, the offer to AECOM would be tentative, pending a period of due diligence.

"If for whatever reason that doesn’t work out, we would like to revisit Sherman’s proposal," Stern said.

Though Stern’s words do appear to leave the door open a crack, Sherman will not alter its plans, said Shane LaFave, the company’s director of multifamily development.

"We’re not interested in doing condos due to the high risk level both legally and financially, so we’ll keep our proposal as is and see if it comes back our way," LaFave said in an email on Tuesday.

It is the second time that Sherman has been runner up for the site. In 2015, the city granted Golden Valley, MN-based M.A. Mortenson rights to build a hotel there, but the project was canceled in August 2017. The city reissued a request for proposals in March of this year.

AECOM is a Fortune 500 company that offers engineering, design and construction management services, but also has a real estate investment arm of its own. It has 87,000 employees and a presence in more than 150 countries on all seven continents. Executives there could not be reached for comment.

Clare Kennedy, Minneapolis / St. Paul Market Reporter  CoStar Group   
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